board room Magazine of the Institute of Directors in New Zealand in New ofDirectors Magazine Institute ofthe
DEC / JAN 2018 THE EMERGING THEIR VIEWS ON THREE SENIOR ISSUES FOR 2018 DIRECTORS SHARE SHARE DIRECTORS
CONTENTS
A note from the editor.
As 2017 winds down, eyes are already turning to 2018. In this issue, the IoD's Governance The Agenda Leadership Centre (GLC) identifies the top DECEMBER / JANUARY 2018 five issues directors should keep front of mind over the next 12 months (page 8). INSIDE IoD Drawn from feedback to our 2017 Director Sentiment Survey (page 22) and BoardRoom details a review of the major issues globally, the five 04 issues identified present a New Zealand- 05 CEO letter focused agenda for the coming year. 08 Trust and confidence heads the list. 06 UpFront The GLC recommends boards foster transparency and engagement with 36 GLC update stakeholders in order to build and sustain business legitimacy. 43 DirectorVacancies Up next, ethical behaviour is an ongoing focus for directors, and boards need to set 44 Out & about the tone from the top. A growing trend globally, shareholder 46 Events diary activism is the third item to which boards should be, and in many cases are, turning FEATURES their thoughts. The GLC advises that DIRECTOR SPEAK / Three effective engagement with shareholders senior directors share their 08 Top five issues for is the best starting point for meeting views on issues for 2018 directors in 2018 shareholder expectations. and Director Speak Another challenge voiced by members in our Director Sentiment Survey is access 16 Turning an eye to Asia to skills and talent. Boards in 2018 will need to be aware that skill shortages put the 22 Director Sentiment onus back on organisations to find ways 16 Survey: Stakeholder to train and retain effective staff. interests top of mind Lastly, data governance presents a for boards challenge to directors. The imperative is to help their organisations realise the benefits 26 Customers before of modern data collection techniques technology while ensuring personal information is 32 Anti-money laundering appropriately protected legislation As General Manager GLC Felicity Caird says, 2018 will be a year in which boards TURNING AN EYE TO ASIA / 34 Meet our emerging will need to think beyond compliance in Exploring opportunity and risk directors assessing risks and the drivers of business in China and India sustainability. 38 Making a difference: NFPs and the Governance with Aaron Watson Purpose programme Acting BoardRoom editor 26 FROM OUR PARTNERS 14 A global perspective / Marsh 20 Cyber security / Aura BoardRoom is the magazine CUSTOMERS BEFORE of the Institute of Directors 24 The road ahead: TECHNOLOGY / Melissa in New Zealand corporate responsibility iod.org.nz Clark-Reynolds talks reporting in NZ / KPMG disruptive business models
December / January 2018 3 BOARDROOM DETAILS
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4 BOARDROOM CEO LETTER
01 What it means to do well and do good
sustainable organisations. giving 0.7% of GDP to others. The contribution that NFPs Recently, I was invited to talk For NFPs, every little bit helps, to the Public Relations Institute and giving money or time helps make to New Zealand’s of New Zealand on what it these organisations stay afloat. economy is so significant means to “do well and do good”. A recent report by Jo Cribb The opportunity to step back called Governing for Good: that it is beginning to rival and think about the NFP sector The Governance Capacity of other sectors. as a whole got me thinking. How NGOs interviewed 36 board well are we doing at doing well members across 12 NGOs and and doing good? identified many challenges. Tēnā koutou katoa At first glance, our NFP NGOs cited difficulty attracting sector is hugely productive. and retaining good talent for As we approach the end of New Zealanders are big on their boards, particularly when the year, thoughts turn from giving, and we have a vibrant based in the regions. The the activities and achievements NFP sector that contributes biggest challenge still for NFPs of the year to reflections on a significant amount to our was securing funding, with the achievements and on economy. 76% saying it was the greatest our contributions to NZ Inc. A report published last year concern for their organisation. KIRSTEN PATTERSON Inevitably, reflections over the by Statistics New Zealand on While there are a lot of donations CEO, INSTITUTE OF DIRECTORS summer holidays also turn the size of the NFP sector found going into the NFP sector, to any new year’s resolutions NFPs contributed $6 billion to funding is still concentrated for 2018. the economy in 2013, and more in the largest NFPs – 89% For many of us, not-for- than 1.2 million New Zealanders of the income for the sector profit (NFP) involvement will contributed to the sector as was controlled by just 11% of be on our list of new year’s volunteers. That’s almost the organisations. resolutions – 51% of our the population of Auckland Strengthening governance members are engaged on engaged in doing great things in this sector is a great step NFP boards, many of them for other people. in addressing some of these balancing their corporate or Two charities are established challenges. Volunteering your state sector efforts with the every day in New Zealand, and governance skills is often more desire to contribute to their more than 114,000 organisations valuable than money. Every communities. For many of us are engaged in the NFP sector. contribution by individual reflecting over the Christmas The contribution that IoD members to better NFP break, the question will be how NFPs make to New Zealand’s governance makes a difference. we can contribute in our NFP economy is so significant Ahakoa he iti he pounamu roles better. that it is beginning to rival – although it is small, it is As the CEO of an NFP, other sectors. In 2013, this greenstone. I’m enormously grateful to contribution was 3% of our GDP, A special thank you to all the many volunteers who help but when volunteer labour is of the IoD volunteers around the IoD promote excellence counted, this rises to 6%. the country both at council in governance. We are so There’s little doubt that us and branch level. fortunate to have so many Kiwis are hugely passionate Safe and happy holiday people who understand how about NFPs. According to the season everyone! good governance benefits Charities Aid Foundation, 01 Read more about NFPs and the Governance with Purpose New Zealand as a whole New Zealanders are the second Ngā mihi programme on page 38 by building stronger, more most generous in the world, Kirsten (KP)
December / January 2018 5 UpFront APPOINTMENTS Hilary Poole Chartered Member, Alan Clarke has been appointed Chartered Fellow, has to the boards of Sport been appointed to New Zealand and High the board of Cavalier Performance Sport Corporation New Zealand
Murray Donald James Sclater Chartered Fellow, has Chartered Member, has been appointed to the been appointed to the Farmlands Co-operative board of TeamTalk board of directors
Erin Currie LOOKING TO THE FUTURE Christine Grice has been appointed Chartered Fellow, has chair of the Medical As we head into 2018, what might our world look like in the future? been reappointed to Technology Association Consider the insights produced by Future Agenda below: the Council for Legal of New Zealand (MTANZ) Education
Miriam Deans James Ogden has been appointed to A CONNECTED FUTURE DWINDLING RESOURCES Chartered Fellow, has the board of the Real Today, over 3.3 billion people 1.6 equivalent planets been appointed chair of Estate Institute of are connected to the internet, of resources consumed MMC fund administration New Zealand and at our current rate, an extra each year 1 billion are being added every 3 years How do we manage 11 billion people with the Predict 50 billion SIM cards same amount of water Q: Can a robot be in use by 2025 as for 1 billion? director of a New Zealand company?
A GROWING AND AGEING SHIFTING POWER AND A: No. Section 151 of the Companies Act 1993 requires POPULATION INFLUENCE directors to be natural persons. We are adding an average The economic centre of of 60 million people a year to the power is moving eastwards planet between now and 2050 NEW COURSES FOR 2018 25% of GDP growth accounted Population of 11 billion for by China on average over DIGITAL GOVERNANCE MASTERCLASS predicted by 2100 past decade (IMF) Check out our interview with Melissa Clark-Reynolds on page 26 ahead of this class launching in Auckland 1.4 billion people aged India as a potential top on 14 March 2018. over 60 by 2030 three economy Other new courses include Foresight and Innovation. FIND MORE AT FUTUREAGENDA.ORG TURN TO THE EVENTS DIARY ON PAGE 46 FOR DATES FOR THE START OF 2018, OR HEAD ONLINE TO FIND OUT MORE, IOD.ORG.NZ/DIRECTORDEVELOPMENT
6 BOARDROOM UPFRONT
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December / January 2018 7 [GLC Report] Trust and confidence Foster transparency and engagement with stakeholders to help build trust and business legitimacy.
rust in business and society is vital to New Zealand’s prosperity. Businesses and leaders are increasingly Tunder public scrutiny, particularly due to the use, Top five speed and ubiquity of social media. Reputations and trust can take decades to build and just seconds to destroy. The 2017 Edelman Trust Barometer reveals a global crisis in trust in business, government and the media. In issues for New Zealand, only 47% trust business, 46% the government and 29% the media. Of real concern, nearly half of New Zealand respondents (47% compared to 53% globally) believe the system is failing them. directors Reasons for the decline in trust are wide ranging: repercussions from the global financial crisis, technological disruption, digital connectedness, social media (including fake news), privacy breaches and corporate failures. Parts of in 2018 society feel left behind and disenfranchised due to growing inequalities and income disparities. Directors operate in a complex and We are seeing a convergence of commercial and social dynamic environment that features drivers in progressive companies, with a greater focus rapid technological change and increasing beyond profit to purpose, people and planet. Proactive scrutiny of social, political and corporate engagement with the community and stakeholders helps behaviour. Global trends show stakeholder build (or rebuild) trust and business legitimacy and licence values and expectations are increasingly to operate. focused on social and environmental It’s important to tell your story. Frameworks and issues and licence to operate. Under the expectations of corporate reporting are evolving, but new government we can expect to see regulatory settings can be slow to change. Governance more change, including a focus on leadership is about thinking beyond compliance and acting reducing disparities. on what’s relevant and meaningful. The 2017 NZX Corporate Governance Code steps up Felicity Caird, GM Governance Leadership expectations of disclosure and transparency on a broader Centre, identifies five issues that should range of environmental, social and governance matters. be top of mind for directors, and we ask Many boards are already meeting these requirements, three senior directors for their views on for example, by producing integrated reports (NZ Post, the issues for 2018. Sanford, Z Energy and Meridian).
TIPS FOR DIRECTORS
Tell your story in a holistic and transparent way – meaningful reporting helps build trust and confidence.
Engage with the community and other stakeholders to build and protect business legitimacy and licence to operate.
Be prepared to respond quickly and constructively to 01 public scrutiny and criticism, including in social media. 8 BOARDROOM FEATURE
New ideas Trust issues Ethical On a recent tour of Australia While building trust among and New Zealand to meet key stakeholders is important, institutional stakeholders, it Perry argues there is a broader behaviour was driven home to Perry how societal-level issue with trust valuable it can be for a board to that business needs to be Ethical behaviour and a healthy corporate leverage the knowledge of its cognisant of. And here again she culture are critical to current and future investors. sees opportunity in disruption. business success. “Some of them have great “Technology and ideas. They look across the digitisation are driving change. he board has a core role in overseeing industry. They look across the People are scared of the changes corporate culture, conduct risk and setting world. I’m not saying we have that are coming and what it Thigh standards of ethical behaviour. It means, to follow their advice, but let’s means for their jobs, for their thinking beyond compliance, taking the lead and engage with them on the things livelihoods. setting the tone for the organisation. that are happening and find out “Education is one area where The digitally connected world means workers what some people are doing in a this is clear – what our kids and stakeholders (investors, employees, consumers better way.” are learning today will not be and media) have instant access to information about Perry suggests boards invite what is needed when they leave an organisation and its activities. Social media has investors and talk about where school. What should they learn? changed the game, and corporate behaviour and the organisation is heading at Nobody knows the answer. But practices are in the spotlight. And the lens is wide, a formal investor strategy day. that says to me that we should extending to how diversity and inclusion is promoted However, she says there are be teaching them how to be and the organisation’s approach to social and members of both boards and curious.” environmental issues. 0 management who are reluctant As strong corporate citizens, Conduct risk, such as fraud, corruption, bribery to “show our hand”. businesses must work with and unethical behaviour, can cause significant “It takes people around the government to ensure our financial and reputational damage. The 2017 Director board table to be brave, quite systems, such as education, Sentiment Survey found that only 40% of boards frankly. change in ways that benefit >> “One of my companies has business and society, she says. done it – we did it last year, and the investors really engaged. Access to talent They are trying to understand. “Business wants its people to be 2 They are not trying to second curious, agile and nimble. How guess us or criticise us. The do we get there? We need to help reason they invest is they believe our kids develop the ability to Genesis, Trade Me and in the company.” pick up ideas and skills and be Regional Facilities Auckland. Being more transparent interested in things. She argues boards in 2018 about strategy can make it “That is one of the roles need to focus strongly on the easier for stakeholders to see business can have with strategic opportunities – and when plans go awry. But that government, to help government challenges – that are emerging is just part of the business think like that. It’s not lobbying, rapidly in the business of governance, Perry says. it’s collaboration.” environment. “What if we don’t achieve Perry describes the strategic [Director Speak] “Boards need to ask: What it? Well, we have to talk about issue facing business as posing JOANNA PERRY CFInstD are these changes? What is our it and look at the options. We much larger questions than business?” she says. can’t be scared of not achieving businesses have traditionally “And boards need to say, ‘We our goals. We adopt a strategy tried to deal with. Change up need to be nimble. We need to because we believe in it. Why “It’s not about business skills “There is a tsunami of change be agile. We need to be change don’t we share it so others can per se or environmental issues coming, and boards need to be oriented. We need to have a believe in it as well? per se. It’s much wider than ready for it,” suggests Joanna growth mind set.’ “You do it at a level that is not that. It is a societal change that Perry MNZM. “It’s a joint management and giving away anything to your business can be part of. That’s Perry currently holds director responsibility to make competitors. You don’t give away what I truly believe.” directorships on a number sure our agendas are focused on your tactics. The investors love of organisations including the future.” it. They absolutely love it.”
December / January 2018 9 << receive comprehensive reporting from management on ethical matters, and just 44% assessed ethics risks in the past 12 months. Less than two-thirds discussed whistleblowing. [Director Speak] Boards need to insist there is an effective MARK CROSS CMInstD whistleblowing culture and mechanisms are in place to support it. We don’t have to look far to see why – Harvey Weinstein, Fuji Xerox and the Ministry of Board responsibility Transport fraud case. A good indicator of an effective Z Energy, Chorus, Genesis, performance or governance. culture, and that systems are working, is when the and Argosy Property This may result in larger board hears about incidents and bad news. Decisive director and Milford institutional investors leadership in following up on incidents and potential Asset Management chair making contact with board risks is critical. Mark Cross addressed or management. It is crucial boards get robust reporting from shareholder activism on the The purpose of that contact management so they can effectively oversee direction MinterEllisonRuddWatts is primarily collaboration and risks. Internal audits can provide independent Corporate Governance and communication to assurance to the board through testing controls for Symposium panel earlier this acknowledge and address culture such as complaints processes and follow year. “It’s on people’s minds,” issues, Cross says. through. External sources of information (for example, he says. “The preference of all the social media monitoring and independent reviews) Globally, shareholder institutions I speak to would can also help the board gain assurance. activism is on the rise be to collaborate in a way that Having a discussion in board-only time, as well as with activist hedge funds achieves both parties’ aims. with management, provides a good opportunity for free such as Pershing Square “That’s certainly the aim – and frank discussion about corporate culture and ethical Capital and Elliott Advisors although I suspect if you ask behaviour and to consider any potential red flags. making headlines through the boards on the receiving public attacks on board end they probably wouldn’t TIPS FOR DIRECTORS performance. feel like it is collaborative.” “In New Zealand, it is more Set the tone – promote, inspire and embody subtle than that,” Cross says. Engagement works organisational values and expected behaviours. “We don’t tend to see Managing shareholder Oversee conduct risk and drive expectations about specialist funds taking a 3% activism effectively starts high standards of ethical behaviour. position then trying to take with engagement, Cross says. the board down. Activism “They [institutional Ensure there is an effective whistleblowing culture is typically more behind investors] would rather be and systems in place and monitor them. the scenes.” engaging with the company A common concern of all along than simply when Ensure there is comprehensive and timely reporting shareholders in New Zealand there is a problem.” from management. Utilise internal audits and board- is perceived shortcomings in Cross notes an overseas only time to ensure robust scrutiny and discussion.
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10 BOARDROOM FEATURE
Shareholder activism
Understand shareholder expectations and have a continued focus on how to improve trend, typified by the Bank of Australia case in effective engagement. Stewardship Code maintained which money was being by the UK Financial Reporting laundered through the bank’s hareholder03 activism is not new to New Zealand, Council, to encourage ATM system. but it is increasing in line with global trends. institutional investors “You get investors S Institutional investors are pushing strongly on to promote long-term following up and asking, governance, social and environmental issues to help enable profitability in the companies ‘How did this happen, and better performance and long-term sustainability. Two key in which they invest. what are you going to do areas of focus include board composition (diversity, tenure, “It’s turning it around about it?’ director independence) and remuneration (director fees so that it’s not just boards “You could broadly group and in particular executive pay). that have a responsibility to that into ESG-type concerns And it’s not just institutional investors. The New Zealand investors. Under the concept – environmental, social and Shareholders' Association (NZSA) has been increasingly of stewardship, investors, corporate governance – that active over the past year, including on virtual-only AGMs, usually larger institutional are an increasing trigger for getting enough proxy votes from Rakon shareholders to shareholders, have a activism. vote out one of the directors and surveying members ahead responsibility to engage with “If you draw ESG activism of the Fletcher Building AGM to add weight to issues (such boards in a constructive way back to its origins, it is often as performance and director remuneration) it was pushing and to not pressure a company the smaller retail investors with the board. to deliver short-term returns.” into the large institutional Scrutiny of CEO pay is increasing in New Zealand funds who are demanding (for example, at Fonterra, Sky City, Fletcher Building, NZ Issues for activist that the funds take Super Fund and TVNZ), again following global trends. investors responsibility. So it is More questions are being asked about how pay aligns with “Typically, I would say it client-driven activism in company performance, including the CEO’s contribution, starts with the share price many respects.” and about disparities with workforce pay. – poor performance relative Open disclosure by boards of CEO remuneration, and to an index or relative to an Engaging with the the rationale behind it, is important. The NZSA Framework industry,” Cross says. future for Reporting of CEO Remuneration in New Zealand “The next popular area Cross argues boards in Companies provides a useful framework for boards. is remuneration. That’s 2018 should be developing This year, 67% of boards in the Director Sentiment right at the top of the list. strategies to maintain their Survey said they discussed how they could engage Particularly if you look at companies as sustainable more effectively with shareholders. It’s important to Australia, it is remuneration entities. A sustainable keep up with shareholder expectations. Technology and that evokes the ire of strategy should acknowledge digital connectedness enable more diverse and direct shareholders – remuneration the aims of a very broad engagement, for example, through social media, roadshows, of CEOs, sometimes boards, stakeholder group and take websites and electronic briefings, and more use of virtual where there is perceived into account the position AGMs, often in conjunction with a physical meeting. to be a lack of alignment of the business in society. between remuneration and Developing this is a big task, TIPS FOR DIRECTORS performance. he says. “I’ve yet to hear a “Ultimately, it is boards Have regular discussions about how to engage more consensus view on what that have to decide to do effectively with shareholders. a proper remuneration that. Shareholders can buy structure looks like, but the and sell shares and don’t Consider what opportunities (and risks) technology investors certainly know what have a fiduciary obligation offers for better engagement, including getting more they don’t like.” to the companies they invest out of AGMs and social media. There is also increasing in. But directors do have a activism around governance fiduciary responsibility to the Provide open and understandable disclosure of director and management weaknesses. company and have to make and executive remuneration (use the IoD and NZSA Cross cites the Commonwealth the ultimate calls.” guides). Provide a rationale and context about alignment with strategic objectives and performance. >>
December / January 2018 11 <<
Europe’s General Data Protection Regulation (GDPR) comes into effect in May 2018 and aims to better protect Data data privacy in the digital world. Boards and executive management will be held responsible, and regulator breaches and non-compliance can have high costs (fines up to €20 governance million or 4% of global turnover). The regime has global reach, applying to any company handling EU citizen data. Maximise the benefits from data and prioritise The NZ Data Futures Partnership is working to protecting personal data. strengthen our data ecosystem and drive more effective, trusted data use. Guidelines released in August aim to help yber security is on the agenda for many boards (50%, users develop social licence for their data activity to gain up from 32% in 2016) and is recognised as a core risk community acceptance. Cfor organisations. Another aspect of data governance The Privacy Act 1993 is being reviewed to ensure it is fit is the use of data analytics to drive innovation and business for purpose in a modern world and is expected to include performance and the protection of personal data. mandatory reporting of data breaches. Managing this unlimited and valuable resource is a growing challenge presenting major opportunities and TIPS FOR DIRECTORS risks in a digital global environment without borders. More large organisations are taking advantage of Align insights from data analytics with business big data, which is defined by the Oxford Dictionary strategy. Use data to support innovation and decision as “extremely large data sets that may be analysed making, for example by better understanding consumer computationally to reveal patterns, trends, and behaviours, patterns and risks. associations, especially relating to human behaviour 0 and interactions”. Understand what and where your data is, how it is Possible uses include the development and collected, used and shared and the applicability of global personalisation of new services and products driven by regimes such as the GDPR. machine analysis of detailed information about consumer behaviours, preferences and needs. Ensure transparency about how data will be used Although some commentators may say privacy is and protected and aspects such as anonymity, consent, dead in a online world, privacy is a current and real issue. who benefits and how. Regulatory environments are evolving, and we can expect 4 to see more change.
[Director Speak] increasing level of uncertainty makers, government, educational transparency, Verbiest says. MARK VERBIEST CFInstD in society as to what the future institutions … everyone has a role.” “You are finding an increase holds.” At a minimum, businesses in in transparency, and that is “At least two of the boards 2018 need to recognise that the ultimately a result of shareholder Building trust I am on have specifically age of social media is the age activism. Probably the most Mark Verbiest sits on the considered the Edelman Trust of customer power, he says. obvious example of that is boards of Meridian, ANZ and Barometer, and there have “The company’s approach to around executive remuneration Freightways and the advisory generally been discussions issues such as the environment, and the appropriateness of the board to NZ Treasury. He is the around it. I think what you are sustainability, more generally structure that a company might immediate past chair of both seeing, particularly at the top end what the values of the company have in place. Spark and Transpower and of town, is that business leaders are, how transparent it is and how “I have to say that, on ESG chair of Willis Bond Capital are taking the lead on some of the it operates in favour or not of the [environmental, social and Partners Limited. broader issues at play.” customer are going to be critical corporate governance] matters, For Verbiest, the issue of trust Verbiest says New Zealand is to a company’s licence to operate.” more generally there is a mixed and confidence goes broader fortunate to have a group of CEOs response from investors. All than business. prepared to take on issues such Shareholder activism investors will tell you these “It is trust across a number as societal trust. A corollary of the rise of customer matters are important, but of entities,” Verbiest says. “That being said, they won’t power is a rise in shareholder some still make decisions based “Underlying that is an be able to do it alone. Policy activism and company primarily on financial metrics
12 BOARDROOM FEATURE
Access to skills and talent Ensure the organisation’s talent strategy This type of work/worker isn’t new, but the growth and is adaptive and fit for future needs. extent of it is. McKinsey & Company (2016) estimates 20–30% of the working-age population in Europe and the United States or the fourth consecutive year, labour quality and is in the gig economy, with about two-thirds doing it through capability has been identified in the 2017 Director choice, preferring the independence and flexibility. This FSentiment Survey as the top risk for businesses. preference is evident from millennials seeking greater work-life A tightening labour market saw the unemployment rate balance to older workers phasing their approach to retirement. at 4.6% in September, the lowest in 9 years. It’s widely accepted that pay is only one of many drivers Challenges for boards include labour shortages and of worker engagement and satisfaction. Workplace culture, changing skills needs. We are also hearing about more fairness, business values and societal contribution are also boards struggling to attract executive talent due to global of key importance and can be the point of difference in shortages, competition and greater mobility of executive attracting and retaining talent. Embedding an adaptive and skills and experience. learning culture to help develop new worker skills can help Technology is fundamentally changing how we live, work enable workplace transformation in a rapidly changing and and relate to each other. Workforces are becoming more disrupted world. transient and mobile. Deloitte’s 2017 Global Human Capital Trends describes our changing workforce as “more digital, TIPS FOR DIRECTORS more global, diverse, automation-savvy, and social-media proficient”. Prioritise strategic discussions about disruption, A job for life has become a rare (perhaps extinct) concept. innovation and future workforce and skills needs. 0 The 40-hour week is also declining as the default option, with many workers opting for greater flexibility of hours and roles. Understand worker (as well as organisational) needs We can see this in the growth of the gig economy. and how flexible workplace practices can enable It means significant change to the composition of the participation and enhance productivity for your business. workforce and the nature of work. Gig or independent, workers take on (contract) temporary, specialist, often part- Ensure the organisation is adapting its talent strategy time work and sometimes multiple jobs at a time. Workers to a transforming workforce and future needs. cover the spectrum from low to highly skilled. 5
(less so those investors who are moving into different roles with “It’s the need to make sure longer-term holders). more relevant skills. that we’re maximising access “I think that, among business to talent, for example, through Skill shortage leaders, there is a growing outside partnerships with the Issues included in this space recognition business has to likes of TupuToa (internships include the impact of technology be a part of, and lead, the with young Pasifika) and on the workplace and how conversation about the future starting to consider what kind of expectations of work are of work. A cultural mantra is vocational retraining we should changing and how that effects developing along the lines of be looking at. culture, engagement and hiring ‘no one should get left behind’. “I think it is worth actually can make a real, positive and retention. Everybody has to be catered acknowledging and recognising difference to New Zealand.” “The nature of work is for. That isn’t something that we are genuinely quite This could happen partly changing. A lot of that is business can solve alone, but it is fortunate in New Zealand to because of our small population, technology driven. There is a something that everyone should have a group of CEOs who are Verbiest says, but predominantly growing recognition of the need be concerned about.” concerned about broader issues it’s because we have a group of to train people with relevant Part of maximising talent in around sustainability, around people who are committed and skills and, just as importantly, an organisation is considering work, around the environment, really want to make a difference. to look at potentially retraining diversity and inclusion policies, and they in conjunction with people who are capable of he says. government and policy makers
December / January 2018 13 A global
MARCUS PEARSON, COUNTRY HEAD, perspective MARSH NEW ZEALAND
Considering New Zealand’s geographic location, we We are more globally connected could easily feel removed from what is happening in than most realise. Specifically, the world. boards must have greater engagement with management Threats of conflict in North on these issues and outline how Korea, involuntary mass global risk factors manifest in migration across Europe and daily operations. This should frequent acts of terrorism play especially be considered, of out in the news and yet we still course, when looking at entry feel quite safe in our remote to new markets and countries. island nation. It is also important to look We can’t, however, at these issues of change in divorce ourselves from what In 2017, we have seen the far regards to your own people. for companies that misuse is happening overseas, as right make a stronger bid for The CEO of our parent or neglect their social media global events are no longer power in France and Germany, company MMC, Dan Glaser, capabilities. constrained by borders. a referendum in Turkey, the was recently quoted as saying, In our 2016 Directors’ Risk The World Economic Australian marriage equality “Employees have changed. Survey, directors rated the Forum Global Risks Report plebiscite and of course They’re much more active. increasing influence of social pointed to the need for “Jacindamania” in Godzone. They’re more interested in media as the top risk that could businesses to understand 2018 is not likely to be a company that has values.” impact businesses in the next and plan for an array of risks any different. These waves of 12 months. This has certainly that are emerging such as political and social instability come into play throughout the rising geopolitical tensions, could create a range of course of the year. deepening societal polarisation disruptions to business activity, Through increased and rapid technological not only in regards to regime interconnectivity and rising change. All of these things change but also from civil societal polarisation, social have been felt here and have disturbance, asset bubbles, media has enabled previously consequences no matter the changes to trade agreements, alienated populations to size of your organisation. terrorist attacks and communicate their grievances, government policy reversals SOCIETAL coordinate demonstrations GEOPOLITICAL RISKS (proposed tax cuts). POLARISATION and revolt in a manner Companies should review that could easily spread A wave of populism has how the underlying sentiment Today, almost all large and beyond national borders. been sweeping the globe. might cut across the business medium-sized organisations Exacerbating this phenomenon Unexpected outcomes from environment to amplify have a presence on social is ominously low levels of trust referendums and elections key uncertainties, sharpen media, which can offer of both governments and have shaken the status quo in consequential risks and significant benefits when big corporations. Pervasive a number of countries. In 2016, introduce new challenges. used correctly. However, corruption, short-termism, fake it was the UK Brexit vote and Build global risk trends into social media also presents news and unequal distribution the US presidential election. your future planning processes. brand and reputational risks of the benefits of growth are
14 BOARDROOM MARSH
WHAT SHOULD DIRECTORS BE THINKING ABOUT?
Companies must build business strategies that take into account risks related to geopolitical tensions, deepening societal polarisation and rapid technological change. Build global even from a relatively Directors should ask unsophisticated attack. themselves questions such as: risk trends into Several large companies your future were affected by the global How will societal and political WannaCry cyber attack in changes impact on corporate planning May, while local companies operations and profitability? processes. had a targeted breach of their customer data in October. If supply chain risks increase We are more It is not just cyber that based on geopolitical globally boards need to be focused disruption, how might that on however. New technological impact cost and structures and connected than innovations such as artificial revenue streams? most realise. intelligence (AI) and robotics are said to pose the greatest Is there a strong operational challenge over the coming years. framework for the organisation’s Just consider for a cyber security programme? creating levels of distrust not politics “capitalism has failed moment the magnitude seen since pre-WWII. This New Zealand” and of course of disruptive technologies Are there solid guidelines in breathes wind into the sails fake news (tax increases and currently in varying stages place pertaining to the use of of the political extremes, and budget holes). of development and use. 3D social media in the business? social media provides the In this era of “fake news” printing, nanomaterials, AI “echo chambers” of like- and volatile social issues, and robotics, biotechnologies, How can we better minded groups that many organisations should re- energy capture and storage, communicate with our believe determined the US evaluate whether they are blockchain, geoengineering, stakeholders given the low levels election outcome. doing enough to protect and Internet of Things, of inherent trust? Should we We saw this at a local level manage their reputation with neurotechnologies, quantum let our CEO “off the corporate in October when protesters customers, employees and computing, space technologies communications leash”? crashed the annual defence other stakeholders. Rumour and viral/augmented realities. industry conference in and allegation are not new We are indeed witnessing the Wellington. Media reported problems for companies, but in fourth industrial revolution, We live in a time of heightened that they had been rallying today’s “always on” world, the and the average customer of global risk but also of great people on social media for rapid spread of misinformation the future is going to look very, reward. Every challenge will months ahead of the event can happen within hours and be very different to now. need an innovative solution, and that people came from more challenging to overcome. Boards must consider the and the upside of technological around the country to people risks associated with change outweighs the attend. We also saw it in the RAPID TECHNOLOGICAL these new technologies and downside. While new policies recent New Zealand election CHANGE how new ways of doing things may close some doors, they will campaign, where social media will impact on their workforce. inevitably open others. With a was flooded with debate on Cyber risk was the number New skill-sets will be required, careful eye on emerging global social issues such as failed one risk in our 2016 Directors’ organisational cultures will risks, companies can thrive in infrastructure planning, Risk Survey. change and companies will this volatile environment. poverty, housing affordability, The risks have not need to keep abreast of these environmental concerns, lessened and can still cause changes to ensure they have distrust of right-of-centre significant financial damage the right people on board.
December / January 2018 15 Why are we looking at this market? ... How can we assure that our brand and reputation does not suffer? Is this a strategic investment, and is it the right investment for us? Ziena Jalil
BOARDROOM FEATURE Turning an eye to A sia Asian markets such as those in China and India represent growth opportunities for New Zealand business, but as with any new market, there are inherent risks second-largest tourism market. Panellists spoke to the to understand. The Eye on Asia forum influence of President Xi Jingping and messages that in October, held in partnership by the had come from the 19th Communist Party Congress IoD, New Zealand Asian Leaders and the in October on the country’s economic goals. Superdiversity Centre, brought together Terry Lee, managing director of Milk NZ, says the panellists and case study presenters to share Communist Party has signalled a new era in China and their expertise in this region of the world. pointed to specific themes coming out of the Congress. Primarily, the focus is on addressing the contradiction New Zealand businesses can do well in Asia, and between unbalanced development (an ambitious target China and India are promising markets. Both the Modi to eradicate poverty by 2020 has been set) and the government in India and Chinese Communist Party Chinese people’s ongoing desire for a better life. under the leadership of President Xi Jingping are “As a director, study this trend very carefully to making changes to legislation and policy that impact understand what your strategy should be,” says Lee. on business. On a global scale, China is positioning The signals are that China no longer wants to fulfil itself to build greater trade and business ties with the role of ‘factory to the world’ and is looking to take countries including New Zealand. The Belt and Road a different role globally. While the wide-scale production Initiative was mentioned during the forum as an and exporting undertaken by China has been beneficial indicator of where the Chinese market is heading. in pulling large swathes of the population out of poverty, the growing Chinese middle class have new ambitions. A CHANGE IN ECONOMIC FOCUS This influences economic activity, the partnerships Chinese businesses will be looking to make and the he case for business involvement in kind of products and services Chinese consumers are India is changing. India is ranked 40 in seeking, Lee says. Tthe World Economic Forum (WEF) global With this context in mind, Dr Xiaoying Fu MInstD, competitiveness index and has been the fastest chair of NZ China HiTech Innovation Alliance, says growing economy in recent years with an average directors should consider what, other than dairy economic growth rate of 7% over the last 20 years. products, New Zealand businesses can take to China. India jumped from 130th to 100th in the latest World China is investing more in becoming a high-tech Bank Doing Business report, which rates countries on market like Japan and South Korea. Dr Fu highlighted ease of doing business. Prime Minister Narendra Modi China's achievements such as the Quantum Space wants to see India in the top 50. Satellite, Tianhe-2 (the world’s fastest computer) Commentators such as the Financial Times say and Danyang–Kunshan Grand Bridge (the world’s the change in global competitiveness is a result of longest bridge). Dr Fu asked whether New Zealand direction being set by the Modi government and is too invested in agriculture at the expense of tech attempts to address problems such as corruption. industries like gaming, which has huge market potential The WEF reports the private sector finds corruption in China. Statista reports the 2015 revenue for the to be the most problematic factor for doing business Chinese video game industry to have reached 140.7 in India. billion yuan (approximately NZ$30.8 billion). China, too, is changing its economic focus. China is Forum facilitator Chartered Fellow David Jackson, a New Zealand’s largest goods trading partner and our director of Fonterra, told attendees that New Zealand >>
December / January 2018 17 01 Facilitators David Jackson and Mai Chen 02 Chandan Ohri 03 Terry Lee 04 Ziena Jalil
And just because your product or service is well liked in New Zealand or Australia is no guarantee of success in India or China. “It’s a huge risk to think if you make it in one country that you will make it elsewhere. It always starts with what the market wants, not what you want to sell it,” says Jalil. Panellist Chandan Ohri, managing partner of global business services at IBM, highlighted the importance of the Digital India project and how that changes << 01 the way people interact with services and their expectations needs to decide what we can on businesses. The Modi take to the world. While our It’s a huge risk government has signalled a dairy products are valuable, “citizen first” approach. Digital could we take our technical to think if you make India is part of an approach expertise offshore? How does it in one country, to make government services the changing preferences more readily available, aligning of the Indian and Chinese you will make it with the needs of the young, markets influence the elsewhere. It always connected Indian population. strategy you develop for India is a market with a entering these markets? starts with what the median age of 26 and close market wants, not to 300 million smartphones KNOW YOUR MARKET what you want to in operation. In China, the consumption iena Jalil is a member sell it. habits of the younger of the IoD, partner at Ziena Jalil generation are changing ZSenate SHJ and spent quickly and are very different 10 years in Asia in roles with to earlier generations. Their Education New Zealand and preferences change quickly, New Zealand Trade and Enterprise. Jalil says it is and brands must adapt to survive. important to have a board asking the right strategic “Understand the market and understand your questions before attempting to enter the market. consumer. The Chinese consumer is changing; “Ask the big questions. Why are we looking at this they are ready to pay more for experience and for market? What are the opportunities and risks? How higher quality. This is a big difference,” Lee says. can we assure that our brand and reputation does “In New Zealand, you can go to the supermarket not suffer? Is this a strategic investment, and is it the and buy the same product in the same packaging right investment for us?” for many years. In Asia, you have to be prepared Recognising the cultural differences across India to redevelop your product more frequently to and China is vital to developing the right strategy for accommodate the new need and new demand entering these markets. In both countries, education from consumers.” levels, wealth and language can differ hugely across the country. There are 22 different languages STRATEGY AND PARTNERSHIPS spoken in India, and in China, the same word can have different meaning depending on the part of the inding the right partner was stressed by all country you are in. speakers, with respect to both India and China. “Do your due diligence,” says Jalil. “Gain insights FDealing with risks like those posed by corrupt into cultural differences, and use your networks in the behaviour and managing the complexities of the markets widest sense possible.” can be better mitigated by having the right partner.
18 BOARDROOM FEATURE
02
03
Both India and China score 40 on the 2016 Corruption The Chinese Perceptions Index, below the 04 global average score of 43 and consumer is the midpoint at 50. Sitting at changing; they be lured to new and numerous 90, New Zealand is ranked other opportunities.” number one on the index, so are ready to pay In both India and China, there are some clear risks more for experience relationships with the right to New Zealand businesses partners can open doors, but operating in Asia. Ethics and and for higher you need to be prepared to be values sit within the frame of quality. This is a in it for the long haul. a director’s responsibilities, so big difference. “You need to make be clear about the ethics and continuous effort. If you are values your organisation holds Terry Lee really interested in China, you and stick to those. need to make a long-term plan,” But, Jalil says, be aware of says Lee. the differences in how senior figures are regarded “The reason I emphasise this is because China and in Asia. Asia offer such big opportunities.” “Relationships matter, but don’t do anything you In the same way that America and Europe offered wouldn’t do in New Zealand. Make sure your actions opportunity for brand growth in the early 70s and align with values and ethics,” says Jalil. 80s as the middle class grew, Lee says this is the The range of opportunities available to businesses opportunity available to businesses in China now. in China is one reason governance models between “Now, the biggest growth of the middle class is New Zealand and China can be so different. Lee in China. This is a once in a lifetime opportunity for highlights the need to move quickly to capitalise on business people with big dreams.” opportunities and says New Zealand boards often spend much longer working through due diligence before doing a deal. “This is not the way you are going to grasp big opportunities in Asia in such a fast-moving market. There are so many opportunities, so Chinese businesses want a deal done very quickly. They don’t Eye on Asia was a collaboration between the IoD, have the patience to wait for board approval and do New Zealand Asian Leaders and the Superdiversity Centre. due diligence, and they have to work quickly to grasp Hosted by David Jackson CMInstD and Mai Chen CMInstD, the opportunity. eight panellists and two case study presenters shared their “Find the right partner,” says Lee, “someone with the knowledge and experience of working in China and India. same or bigger ambitions than you so that they will not
December / January 2018 19 considering the potentially devastating effect a cyber attack can have on an Cyber security organisation’s reputation, its ability to continue day-to-day operations and its bottom line. A further potential cause for concern The year that was and is that some respondents are reluctant to admit being caught out by ransomware. a glimpse into the future When asked, “have you as an individual been targeted by ransomware, phishing or malware in the past 12 months?”, just 41% of respondents answered yes, but the number is likely to be much higher. If you are connected to the internet and use technology, you have almost certainly PETER BAILEY, to profit from their attacks, and despite been targeted. GENERAL MANAGER, AURA your business’s defences, it is possible a INFORMATION SECURITY sufficiently determined one will breach your EDUCATION IS KEY security walls. Without a solid information security approach, a breach is not Something every business needs to be While information security has necessarily an if but a when. aware of in 2018 is that those doing the been growing in importance and Recently, Kordia released the results phishing are sophisticated and highly concern in recent years, some of a survey of 225 IT decision makers in adaptable. It is difficult to spot the of the developments we have businesses with 20 or more employees. attacks, and it takes just one person in seen in 2017 have arguably made Conducted in September, the results of the organisation to let down their guard this past year one of the most this survey presented some interesting for the hackers to gain access. significant to date. findings. A quarter of all respondents It is for this reason that the most crucial said their business was affected by the component in good information security Three key developments in particular had NotPetya and/or WannaCry ransomware is people. Granted, IT is one of the weak a significant impact on the industry. First, attacks, and 65% of respondents said that points, but technology is manageable. the rapid rise of the Internet of Things recent high-profile ransomware attacks It’s human nature that can’t be predicted (IoT). Second, the growing trend around had prompted their business to review and controlled thereby presenting the flexible working – something that is putting businesses at increased risk due to the fact staff are able to access work files and ... despite 68% of respondents believing their data using personal devices. And finally, the sharp rise in the number of high-profile company is ready to deal with a cyber attack, ransomware attacks, which over the past almost 30% stated they did not have an incident few months have put businesses’ security response plan in place. defences to the ultimate test. Add to this the fact that experts are predicting Kordia survey a significant rise in the number and sophistication of cyber attacks, and it’s easy to see why cyber security has become or update their cyber security policies. biggest opportunity for hackers. a key topic at the executive and board level. That’s a potential problem, because both Hackers know where weaknesses lie, and NotPetya and WannaCry exploited known it’s with people – their inability to identify KEY CONCERNS FOR IT vulnerabilities – pointing to a lack of basic risks and their often relaxed approach to DECISION MAKERS cyber security in the first place, such as security. It is in this crucial area that the regularly updating software. survey has delivered good news. Some 66% It’s fair to say cyber security is something The research also found that, despite of respondents stated they had carried that is keeping many IT decision makers 68% of respondents believing their out some form of employee cyber security awake at night. Looking back at 2017 company is ready to deal with a cyber awareness training in the past year. While alone, the attacks have been relentless attack, almost 30% stated they did not this is encouraging, it also means a third of – and unfortunately there is no sign 2018 have an incident response plan in place. New Zealand businesses have simply left will be any different. Hackers are looking This in itself raises alarm bells, particularly things to chance. Ongoing education of staff
20 BOARDROOM AURA
is an essential component in establishing a sufficiently secure organisation and should be a mandatory focus for all businesses in the year ahead.
THE DIRECTOR’S ROLE IS GROWING
And there are more positives. What may seem like a spike in attacks is actually evidence of more companies examining their security situation. Directors are appreciating the threat landscape and acknowledging security, long perceived to be an IT problem, is in fact a company-wide one. In the past 12 months, boards and executives have become engaged in the topic. There is considerable interest from members of the Institute of Directors to understand the issue and their role in cyber security. Looking ahead to 2018, it has a predictably familiar feel. More phishing. More employees making uneducated mistakes for hackers to capitalise on. More ransomware. Cyber crime is big business, and those criminals will keep doing what nets them the best result.
AN ENDLESS LOOP?
For many companies, addressing cyber As a board member, you of the company culture to security can seem like an endless loop can make yourself and stay up to date with cyber of risk and reality egging each other your business less of a security best practice. At Aura on. Thankfully, by reviewing the cyber target with these three Information Security, we recently security climate over the past 12 months, recommendations: launched CyberWise, an online forecasting developments to come in subscription-based training tool 2018 and keeping our finger on the 1 designed to help businesses raise pulse of the shifting threat landscape, Get the IT house in order. the overall standard of cyber security experts are in a good position The Australian Signals security. Tools such as this can to provide advice to businesses in what Directorate’s Essential Eight simplify the process of keeping is an increasingly turbulent climate. outlines some of the basics: up to date with cyber security. The approach we recommend is application whitelisting; patch focused on the fundamentals of solid applications; disable untrusted 3 information security: improving policies Microsoft Office macros; daily Plan for an incident. and processes, education and making back-up of important data and Be prepared. There is still the information security an integral part of more. Do just this and you are possibility that something may everyone’s job from the boardroom down. already more secure than many happen. How you respond is Above all, a change in attitude is of your peers. often the greater determinant the key and is what will equip your of damage and fall-out. A failure company for a better security posture. 2 to plan is a plan for failure. Being sufficiently secure depends on Educate the organisation. a risk approach, with defined policies Start with yourself, your staff backed by constant vigilance, repeated and the board. Understand reinforcement of good habits and the dangers and make it part preparedness for an attack.
December / January 2018 21 Stakeholder interests top of mind for boards
The annual Director Sentiment Survey reveals an overwhelming majority of boards (91%) consider stakeholder interests a high priority (up from 86% in 2016).
eleased by the Institute of Directors (IoD) and ASB, the Director Sentiment Survey Rtakes the pulse of the director community in New Zealand. The survey reveals key challenges for New Zealand boards, including stakeholder interests, leading on organisational ethics, strategy and risk in the age of technological disruption and access to skills and talent in a tight labour market. The emphasis on stakeholder interests could also be seen in the high number of directors who of directors said considered sustainability and social issues as very % important to their organisation (69%). stakeholder interests IoD Governance Leadership Centre General are very important to Manager Felicity Caird says, “For boards to succeed 91 in today’s environment, they will need to think their organisation, beyond compliance in assessing risks and the drivers up from 86% in 2016 of business sustainability.”
omprehensive reporting from management to boards on ethics and conduct risk is viewed as Ceven more crucial in the business environment with greater stakeholder expectations about corporate behaviour and activities, including social and environmental impact. ! “Boards play an important role in setting the tone on ethics and culture for the organisation and communicating it. In order to hold management to account for ethical risk and conduct, it is essential they receive comprehensive reporting,” Caird says. Ethics risk Whistleblowing The survey also revealed an opportunity for boards to request improved reporting from management to guard against ethics risks. Just under 44% 32% half (44%) of New Zealand company boards have of boards assessed ethics discussed whistleblowing assessed organisational ethics risks, and less than risks in the last 12 months and how to make speak-up a third (32%) of boards had discussed how they could provisions more effective make whistleblowing and speak-up provisions more in the last 12 months effective in their organisations.
22 BOARDROOM DIRECTOR SENTIMENT SURVEY
Labour Digital capability capability 30% 54% of boards have the right of directors cite labour capability capability to lead their and quality as a key constraint digital future
apacity constraints remained a key concern igital leadership within boards and in in the economic outlook, with more than organisations remains a concern, with just 30% Chalf of directors citing labour capability and Dof directors feeling their boards had the expertise quality as a key restraint (54%). This is up from last to lead their organisation into a digital future. While half year, when 46% of directors identified this as one of boards were discussing cyber risks, less than half of the top three issues. of boards (45%) felt that they received comprehensive While the survey indicates business optimism, there reporting on cyber breaches from their management. is more caution on the economic outlook. ASB Chief This year saw a continued increase in the number Economist Nick Tuffley says this may be due in part to of directors considering their boards had the capability the survey’s post-election timing, before a government to comply with the Health and Safety at Work Act 2015 was formed, and to perceptions the economy may be obligations, up from 51% in 2014 to 76% in 2017. This is past its peak in the current business cycle. a welcome trend, but vigilance in the boardroom is still “We are continuing to see the impact of the tight needed, Caird says. labour market register highly in directors’ key “The ability for directors to navigate the rapid challenges,” Tuffley says. changes caused by the digital revolution is a key “This tightening in labour is due to strong economic challenge and should be a priority for boards. performance, which has created a highly competitive “Social media and the risk of cyber breaches also market for talent. Directors identified this as a key mean that companies operate in a more complex barrier to business performance and the economy environment where comprehensive ethics reporting more generally.” and risk management is vital to sustainable success.”
This is the fourth annual Director Sentiment Survey and the second year the IoD has worked with ASB. The survey was conducted in October 2017 and involved 934 members of the Institute of Directors, our highest response rate yet.
YOU CAN FIND THE FULL REPORT AT IOD.ORG.NZ
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December / January 2018 23 The road ahead The future of corporate responsibility reporting in New Zealand
With the introduction of the latest THE CURRENT STATE OF CR internationally recognised reporting New Zealand Stock Exchange REPORTING frameworks such as the Global Reporting (NZX) Corporate Governance Initiative (GRI) and/or the Integrated Code, the days of corporate According to the just-released 2017 KPMG Reporting
24 BOARDROOM KPMG
THE CURRENT In 2015, only 52% of By comparison, FURTHER INFORMATION STATE OF New Zealand companies 93% of the world's largest CORPORATE published information businesses disclose For more information or to download RESPONSIBILITY about their non-financial their non-financial a copy of the New Zealand REPORTING performance. This performance. Supplement to the 2017 KPMG improved to 69% in 2017. International Survey of CR reporting: The Road Ahead, visit kpmg.com/nz If you’d like to discuss how better business reporting can help you and your organisation, please contact Simon Wilkins or Erica Miles.
STRATEGIC RESPONSE applied to financial risks will apply to non- risks of climate change be quantified in financial risks. The onset of a more holistic financial terms and included within annual The role of reporting is not to provide approach will hopefully see box-ticking financial reports. simple statistics and stories to comply compliance consigned to the sidelines and with the NZX code. The value lies in frameworks such as
December / January 2018 25 Customers before technology
Avoid the technology hype in order to solve real customer problems.
here are no disruptive technologies, just disruptive business models, says Melissa Clark-Reynolds. Although most of us think about Ttechnology being a driver in itself for business development, Clark- Reynolds argues that good business decisions begin with considering the customer first. Technology is a tool, and disruption happens when a business sees an opportunity that others haven’t and do something different to Melissa Clark-Reynolds talks address the needs of customers. disruptive business models, The founder of several technology businesses, Clark-Reynolds is one why board composition matters of the emerging group of directors who are equally as familiar with tech as and why it’s more important for they are with governance. She holds director roles with Radio New Zealand, the board to understand their software development training business Softed and architecture firm Jasmax, organisation’s customers than is on the electric vehicle panel at EECA and recently stepped onto the board of new technology. Beef + Lamb New Zealand. In 2015, this contribution was recognised, and she was awarded an ONZM for services to the technology industry. Technology permeates our everyday lives, and as a director, it is important to understand what you need to know about disruption so you can best serve your organisation.
26 BOARDROOM FEATURE
Uber has used technology to solve several problems customers have with transport.
Customers can see exactly where their car is. There is no physical exchange of cash, a certainty of cost upfront and the rating of driver and passenger encourages a different interaction than in Disruptive businesses a traditional taxi. like Uber and Airbnb have left a mark in the transport and accommodation release of the iPod. With its sleek design, the iPod became a must-have, with cars, music players and even industries, not because aeroplane seats modified to allow for interconnectivity. they have a flash piece of However, the portable music player is far from new – it’s an old technology that has been modified over tech but because they have time. Soldiers took their music players with them into addressed a problem. battle in 1917. Format changes brought cassettes, mini- cassettes and later CDs. By the time Apple stepped into the market with the iPod, personal music devices had been available for decades. Sony first dominated the AVOIDING THE HYPE market in personal, portable music devices when they miniaturised cassette players in the later 1970s and t’s important to avoid getting caught up in the released the Walkman. excitement of technology and think about how So while the reaction to the iPod when it was Iit will serve your organisation. In a period of time released was to think, “Wow, this is really disruptive”, when much is said of how new technology will change Clark-Reynolds says it was evidence of a company everything, Clark-Reynolds says we should remember finding a way to commercialise a technology that that a lot of this “new” technology has been around addressed a customer need. for a while, and it’s actually the strategic approach “It’s actually been coming for a while. They didn’t that leads to disruption. create a brand-new need, they just found a way Clark-Reynolds asks us to consider the history to really scale that need and go mass market with of personal music devices. In the early 2000s, Apple it,” says Clark-Reynolds. “They also found a better revolutionised the portable music device with its customer need (10 thousand songs in your pocket), >>
December / January 2018 27 The board needs to understand who the customer is and what problem they're trying to solve. Competitive advantage usually comes from knowing your customer better than anyone else and anticipating their needs.
<< compared to the competition who defined the product by what it actually did (portable music).” In fact, Apple’s approach to the portable music market was quite deliberate, with the company waiting for everything to line up in the world of together customer need along with the tech, Clark- broadband and digital music before releasing their Reynolds explains. product. Steve Jobs told Fortune in 2008, “Things “The convergence of technologies does open up happen fairly slowly … These waves of technology, new possibilities. But while virtual reality needs big you can see them way before they happen, and you data, the two put together doesn’t automatically turn just have to choose wisely which ones you're going into a business. Our job as directors is to be responsible to surf. If you choose unwisely, then you can waste for strategy. What we can end up doing is playing a lot of energy, but if you choose wisely, it actually strong defence or offence in a way where we are driven unfolds fairly slowly. It takes years.” by the technology rather than the customer need. Of course, without the iPod, there would be “Don’t get sucked in to the hype. Boards need no iPhone. to ask themselves, ‘How does this align with our Today, 3D printing is one of the technologies that business strategy, does this solve a problem for our many think might be about to crack the big time, but customers and do we have a clear path to market?’ Clark-Reynolds says part of the reason it’s still in the If you don’t have those things, they’re not going wilderness is that lack of obvious customer demand to be disruptors, they’re just cool tech.” that 3D printing would address. It’s a technology looking for a home. WHAT DOES DISRUPTION LOOK LIKE? “You can invent things, but in terms of them being disruptive, it’s rarely the tech that is disruptive. It’s not isruptive businesses like Uber and Airbnb have that, if you build the tech a market will miraculously left a mark in the transport and accommodation appear that supports it.” Dindustries, not because they have a flash piece For directors, Clark-Reynolds says it’s important to of tech but because they have addressed a problem. know what is out there, but you can’t get sucked into Taxi drivers may believe their business has been the drama and the excitement of technology. gazumped by an app, Clark-Reynolds says, but really “I think there is a lot of hype around new Uber has used technology to solve several problems technologies. Right now, it’s blockchain, virtual customers have with transport. reality, 3D printing, big data. I started doing big data “Often those disruptive businesses solve a different in the late 1980s, and the tools to do it weren’t that customer problem or a bigger customer problem.” great, but everything we are building on now around Uber customers don’t need to phone their taxi machine learning and AI are just evolutions of what service asking where their taxi is, Clark-Reynolds says, we have been doing for 40 years.” they can see exactly where the driver is. There is no Technology plays a role in disruption when physical exchange of cash, a certainty of cost upfront someone figures out a business model that knits and the rating of driver and passenger encourages
28 BOARDROOM FEATURE
a different interaction than in a traditional taxi. board isn’t responsible for knowing about every piece Reducing the disruptive nature of Uber to simply the of technology that is out there. What is more important use of an app is a misunderstanding of what it is about is to know your customer. a business that makes it disruptive. “The board needs to understand who the customer The convergence In New Zealand, businesses like Flick are disruptive is and what problem the customer is trying to solve. of technologies to traditional power companies not because they offer Competitive advantage usually comes from knowing does open up cheaper power – all electricity providers compete on your customer better than anyone else and anticipating new possibilities. price – but for tapping into wider customer concerns. their needs.” Flick, for example, uses ‘smart tech’ to provide data so But while virtual users can decide when and how to consume energy, WHO IS SITTING AROUND THE reality needs big depending on the things like the price of units and BOARD TABLE? data, the two put whether the units available at that time come from together doesn’t renewable energy sources or fossil fuels. o how does a board know when the tech automatically turn Clark-Reynolds says one of the appealing things is a good investment that will address a into a business. about a model like the one Flick runs is the ability for Scustomer problem? customers to not just use the service as part of their “It’s really hard for the board,” says Clark-Reynolds. daily lives but to help them live well. The availability of “Your team comes to you and says we need $20 an app that tells you when the most cost-effective time million to roll out this new IT. As a board, you have no is to run the dryer, rather than not using it at all and way of knowing whether that is the right thing, and you hanging wet clothing around the house, solves don’t want to be the board that says no to technology.” a problem for the customer in an unexpected way. Having the right mix of competencies around Technology is part of the solution to addressing the table is hugely important to making decisions customers’ problems, but Clark-Reynolds says the around technology and understanding how >>
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December / January 2018 29 W We tend to do competitor analysis not on the people who solve the same kind of problem as us but on the people who do what we do. So if we are in the book business, we will monitor other book publishers, not seeing the Kindle coming.
is the third space. Having good competitor analysis and understanding what your competition will look like in the future is incredibly important here, but it’s a bit of a blind spot for New Zealand companies, Clark-Reynolds says. “We tend to do competitor analysis not on the people who solve the same kind of problem as us but on the << it impacts business. Diversity at the board table people who do what we do. So if we are in the book extends to looking at how to bring in directors with a business, we will monitor other book publishers, not background as a CIO or CTO and more entrepreneurs, seeing the Kindle coming. I’ve done it myself. We were in Clark-Reynolds says. This would change the risk profile the online virtual worlds business, and we just didn’t see around the table. But you can’t rely on one person to the Kindle Fire and the iPad mini, and kids just moved hold all of the knowledge in this space. off the web and onto apps really quickly. “It is important that the board isn’t committed to “That’s why the whole team is important – that you a particular technology and that no one on the board are thinking about strategy and competitor analysis from feels like they are ‘the expert’ in tech. It’s a bit like lots of different points of view.” you don’t want one board member who is seen as the financial guru so the rest of us don’t need to know. KNOW YOUR CUSTOMER It shouldn’t be like that.” There are three areas in which Clark-Reynolds says peaking of competition, what does a business it’s beneficial for board members to have experience, like Amazon reaching our shores mean for however. The first is large-scale IT roll-outs and the S New Zealand? commercialisation for technology. While the board There are issues appearing before that point, wouldn’t get involved with project governance, you do Clark-Reynolds says. Fonterra, for example, is really want somebody on the board who can ask the questions skilled at taking product from multiple sources and about whether they have that governance in place. bringing it all through one point of distribution (such The second area is having enough knowledge about as supermarkets). The likes of Amazon and Alibaba new technologies and what they are used for, to the take from multiple sources but also distribute to extent that the board is able to ask the right questions. multiple places. That’s the business model difference, “It’s saying, ‘Should we be using blockchain, how Clark-Reynolds says, and could prove beneficial are we using AI or data analytics?’ It’s about having to individuals in New Zealand, such as farmers. someone who can ask the questions and have an “What it opens up for customers is the ability for intelligent response.” someone in Europe to order something direct from Experience dealing with disruptive competitors a New Zealand farmer. And that changes the game.
30 BOARDROOM FEATURE
If you think about something like My Food taps into a customer desire to understand understand the origin and supply chain for Bag, the ability to do that direct from where their food is coming from. Plant- their food, track and trace ability could be farmer to consumer in the food space based meat is also gaining popularity as significantly amplified with a technology is growing massively.” some consumers choose to move away like blockchain. The bigger question for New Zealand from animal-based products altogether. “The value is there because the is not what does Amazon coming here Clark-Reynolds says boards should be customer wants to know, and that’s where mean for business. What does Amazon asking questions about why these shifts the technology makes sense.” moving into the food industry mean happen. Do consumers want a synthetic Ultimately, the technology doesn’t win for an agricultural country? Amazon version of the real thing or do they want the day. It can certainly harness power if purchased Whole Foods in the United something completely different? used properly, but if your customers don’t States earlier this year, and on the first “Those are the questions the board get their needs met better, then it’s still day of that new ownership, the average needs to be asking. We have to really just a piece of tech. Whole Foods shopping bill dropped 43% think deeply about our business models (Business Insider). and what it is the customer is after. That’s “What can we learn from it? Can we where the value proposition question, Melissa Clark-Reynolds will join partner with Amazon? How do we improve which is the board’s question, comes in. Wayne Norrie to facilitate three our own supply chain management? I’m on the board of Beef + Lamb, and we’re Digital Masterclass sessions in Alibaba, for example, opens up big supply really thinking hard about that.” 2018 in Auckland, Wellington chains that weren’t available. Who thought Knowing what your customer wants and Christchurch. supply chain would be disruptive? But it is.” opens up opportunities to use technology A partnership between Alibaba and Milk to address customer need, and that’s what BOOK NOW TO SECURE YOUR New Zealand has seen fresh milk delivered really makes an impact for a business. In PLACE AT IOD.ORG.NZ to Chinese customers for the first time and the food industry, as consumers seek to
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December / January 2018 31 Anti-money ust because you are a DNFBP, it does not automatically mean J you are in scope of the regime. Coverage of the regime is activity based laundering – it captures entities that carry on one or more of a set of prescribed activities. An entity is a reporting entity if, in the ordinary course of business, it carries out legislation one or more of the activities described in the definition of DNFBP in section 5(1) of the Act. Such activities can be split into two Phase 2 AML gets types: trust and company service provider functions (setting up companies for Royal Assent customers) and gatekeeper functions (managing customer funds). Generally, these activities involve dealing with client The Anti-Money Laundering and Countering Financing assets on their behalf. This might involve of Terrorism (AML/CFT) Amendment Act 2017, which actually conducting transactions on their gives effect to Phase 2 of the regime, has received Royal behalf or giving instructions to a third Assent. This brings accountants, lawyers, real estate party to conduct the transactions. Either agents, conveyancers, high-value dealers and the way, the business will be a reporting New Zealand Racing Board into scope of the AML/CFT entity for AML purposes and subject to Act 2009 . Together, these are referred to as designated full compliance requirements. So the first non-financial businesses or professions (DNFBPs). Phase thing you need to do is determine whether 1 of this legislation came into effect on 1 July 2013 for your business is in fact a reporting entity. banks, casinos and a range of financial service providers.
32 BOARDROOM CA ANZ CONTRIBUTION
WHAT’S IN IT FOR YOU? by fraudsters who might want to deceive you – as well as doing your bit to protect the While some of these requirements public from criminality. will impose new costs on affected businesses, there are also benefits 3 to business from complying with The Act brings New Zealand into line with the regime – in addition to protecting reputable business practice in the rest of the yourself from enforcement action world. Many countries now have legislation by the supervisor. preventing businesses from working with other businesses that are not set up to do 1 AML/CFT properly or that are in a country Many businesses find that doing a risk that has poor standards of AML/CFT assessment gives them an insight into their compliance. By complying with the Act you business which helps in overall business protect your firm’s ability to do business improvement. locally and internationally.
2 4 The AML/CFT programme helps you By complying with the Act, you protect the keep criminals out of your business. This reputation and integrity of your business. means that you are protecting your own business from exploitation, for example,
WHAT DO YOU NEED TO DO?
The effective dates are staggered. Lawyers There are external consultants that File an annual report with the supervisor and conveyancers start on 1 July 2018, develop risk assessments and AML/CFT every year by 31 August. closely followed by accountants on programmes. However, before engaging 1 October 2018, while real estate agents the services of one, you should carry out Get an independent audit of your risk have until 1 January 2019 to comply. For your own due diligence to ensure they assessment and AML/CFT programme high-value dealers and the New Zealand have the necessary skills and expertise. every 2 years by an independent and Racing Board, it's 1 August 2019. These You may also want to subscribe to the appropriately qualified person. are short implementation timeframes, so DIA enewsletter AML/CFT News to keep businesses will need to start preparing for informed of developments. compliance obligations as soon as possible. WHAT’S NEXT? What you need to do after that: What you need to do before the Over the next few months, the Ministry effective date: Run your AML/CFT programme of Justice will be consulting on the which includes: regulations with a view to having them Appoint an AML/CFT Compliance - vetting of any employees engaged finalised early in 2018. The supervisor Officer. in AML/CFT-related duties of all Phase 2 reporting entities is the - training of any employees engaged Department of Internal Affairs (DIA), and Produce a written risk assessment that in AML/CFT-related duties it will produce sector risk assessments assesses the risks your business faces. - conducting customer due diligence and guidance after the regulations are (CDD), including ongoing customer published. Early in 2018, the DIA will also Establish a written AML/CFT due diligence and account monitoring be running sector-specific nationwide programme that contains internal - submitting suspicious activity reports roadshows with the NZ Police Financial procedures, policies and controls to - submitting prescribed transaction Intelligence Unit. address the identified risks. reports (a domestic physical cash transaction that is more than Register in goAML so you can submit NZ$10,000 or an international wire ZOWIE PATEMAN CA, suspicious activity reports and prescribed transfer that is more than NZ$1,000) ACTING REPORTING transaction reports to the New Zealand - keeping records (remember – if it’s LEADER, CHARTERED ACCOUNTANTS AUSTRALIA Police Financial Intelligence Unit. not documented, it’s not done!). AND NEW ZEALAND
December / January 2018 33 Carol Cheng AUCKLAND
Carol Cheng, founder of Hong Consulting Limited, is an experienced business advisor and China business specialist.
With close to 20 years' accounting, auditing and advisory experience in New Zealand, Hong Kong and China, Cheng is no stranger to governance. Cheng said in her application she was committed to lifelong learning. “My passion to add value to businesses, to learn and improve myself and to lead motivates me to pursue a career in governance. Being a Chinese female professional, I would like to step up to lead and pursue professionalism and drive excellence as a board member in New Zealand,” Cheng said. Cheng speaks fluent English and Mandarin. Prior to founding Hong Consulting in 2015, she held leadership roles in New Zealand and China including executive director of PwC New Zealand and partner at Grant Thornton in China. She is an executive member of the New Zealand China Trade Association (NZCTA).
Meet our Daniel Shore WAIKATO emerging Hamilton lawyer Daniel Shore believes the fundamental purpose of governance is preserving and creating value.
Shore serves on three not-for-profit service boards and has directors also gained exposure to governance in sport at a national level through Bowls New Zealand. “I’ve found my relative youth brings a distinctly different Every year, IoD branches around the country perspective to a number of the boards I have been involved in. call for applications from emerging directors I deliberately sought to deliver value through this, and perhaps who want mentorship, experience and support the best example is my involvement with Bowls New Zealand.” with their professional development. The IoD Waikato branch chair Simon Lockwood CMInstD says awards draw applicants from many different the judges were impressed by Shore’s passion and vision for sectors, and we are pleased to congratulate professional governance development and desire to add real winners from Auckland, Waikato, Bay of value to Waikato boardrooms. Plenty, Wellington, Canterbury and Otago Shore receives an award package valued at $5,000 and has Southland, as well as the winner of the the opportunity to sit as an observer on the board of Ultra Fast Canterbury First Steps in Governance Award. Fibre and build his governance expertise with the help of an experienced mentor and IoD membership.
34 BOARDROOM EMERGING DIRECTORS
Laurissa Cooney Michele Frey Jeff Smit and Arron Perriam BAY OF PLENTY WELLINGTON CANTERBURY
Laurissa Cooney believes Napier’s Michele Cholmondeley Children’s Centre Chief Executive Arron Perriam that good governance is Frey highlighted and DETA Consulting Senior Engineer, director and shareholder about creating trusted her commitment to Jeff Smit are joint winners of the Canterbury award. relationships through a lifelong learning in co-collaborative approach her application for the Institute of Directors Canterbury branch chair Vincent Pooch – something that is Emerging Director Award. says the judges were impressed by Perriam’s commitment to essential in a post-Treaty professionally develop so he can add further value to the not- environment. “Ultimately, I seek to impart for-profit sector and Smit's demonstrated desire to improve my best practice learnings and optimise business practices through developing his own “Women, Māori and younger to others who will come governance expertise. voices are a minority around next, so that our future “Both Arron and Jeff stood out as having a strong commitment board tables,” Cooney said generations can lead in to improving their own professional development in the pursuit of in her application. the best way possible. adding the best value they could to future boards they might sit “I am committed to “I want to make a real on. They both recognise good governance as being the foundation being that initial person difference, a positive of great organisations and have a real drive to grow their capability who others can relate to difference, to the future of as professional directors.” and see themselves in so New Zealand. Through the others are motivated to learnings and opportunities ‘show up’ in life.” that come with this award, Cooney is of Te Āti I intend to maximise Hau Nui a Pāpā Rangi it through my shared (Whanganui) descent and is learnings with others, both currently the chief financial in the board environments officer for Te Whare that I am involved in, but Wānanga o Awanuiārangi. also other areas where good Her career spans roles in governance knowledge Jeffrey Broughton audit and risk for Deloitte could be beneficial.” OTAGO SOUTHLAND in New Zealand and An environmental London, and she was one services principal at Opus His attitude to planning and commitment to developing his of the founding members International by day, Frey governance career elevated Jeffrey Broughton above the of the CAANZ Māori is also a triathlete who competition to receive the 2017 Institute of Directors Otago Accountants Network. She represented New Zealand in Southland branch Emerging Director Award. serves as an independent the Long-Distance Triathlon director on the boards of Āti World Championships Broughton says his priority is building long-lasting relationships Hau Incorporation Limited in Canada in August. and focusing on ensuring boards have robust governance and Ngā Tāngata Tiaki. Frey receives an award frameworks to facilitate strategic discussions. package consisting of IoD Broughton is a Chartered Member of the IoD, an associate professional development, director of Ngāi Tahu Farming and a director on Kāti Huirapa the opportunity to sit as Rūnaka ki Puketeraki and Puketeraki Ltd. He receives an observer on a board $1,500 towards an IoD director development course of his for up to a year and build choice, complimentary membership of the IoD for a year and her governance expertise complimentary attendance at four Otago Southland branch with the help of an events where members can learn and share their experiences. experienced mentor and IoD Broughton also has the opportunity to be mentored by an membership, all for a year. experienced director. >>
December / January 2018 35 Governance Leadership Centre FELICITY CAIRD << continued from page 35 [Update] GENERAL MANAGER, GLC Madeleine Surie CANTERBURY FIRST STEPS IN GOVERNANCE AWARD Keeping members current on governance developments, highlighting changes in the social Madeleine Surie has been recognised for enterprise landscape in New Zealand and making her dedication to helping empower future submissions on governance-related matters have been female leaders. recent priorities of the GLC. Surie, brand manager of K9 Natural, is also the founder and trustee of Forward Foundation, a charity that empowers young females to become positive leaders within their communities using sport as a context. Last year, the charity introduced 297 girls to new sports and delivered 1,507 new sporting experiences to girls though its Ambassador Programme. As part of the award package, Surie will take on an internship position on the Ronald McDonald House South Island board for 2 years. Institute of Directors Canterbury branch chair Vincent Pooch said the judges were impressed by her enthusiasm to support BEYOND PROFIT: 01 others and desire to professionally develop THE SOCIAL ENTERPRISE as a director. REVOLUTION “Maddy is an inspirational young woman who has a strong professional and Social enterprises – organisations that trade for a personal desire to make a real difference in social, environmental or cultural purpose – are on the rise worldwide. governance. Her experience combined with They are helping to address some of the key global challenges of her long-term career goal to ensure other our time such as inequality and environmental sustainability. It is females have opportunities makes her a real expected that the sector, which includes not-for-profit and for-profit asset to the Ronald McDonald House South businesses, will grow significantly in the coming years. In our fourth Island board.” DirectorsBrief of 2017, we discuss the social enterprise ecosystem The First Steps in Governance Award in New Zealand including the legal form, business models, was established in 2013. The award developments, what’s happening overseas and why mainstream package includes a 1-year IoD membership, business and directors in all sectors should take notice. complimentary attendance at all IoD Canterbury branch functions during the SEE ALL IOD DIRECTORSBRIEFS AT IOD.ORG.NZ year, mentoring from an experienced director and $830 towards IoD professional development courses.
36 BOARDROOM GLC UPDATE
FINANCIAL MARKETS AUTHORITY CORPORATE GOVERNANCE IN NEW ZEALAND [Update] FMA’S CORPORATE GOVERNANCE Principles and Guidelines A handbook for directors, executives and advisers HANDBOOK
In November, the FMA consulted on updates to its corporate governance handbook. The current handbook, which includes nine high-level corporate governance principles and guidelines, is a reference for directors, executives and advisors. The FMA is refocusing the handbook on unlisted companies now the NZX Corporate Governance Code has been updated for listed companies. The FMA updates to the handbook align with developments in corporate governance since it was published in 2014, including non-financial reporting, directors and executive remuneration and auditors. 03
NZX LISTING RULES REVIEW
NZX is reviewing its Main Board/Debt Market Listing Rules, the first major review since 2003. The review will 04 also impact NZX’s junior markets, the NXT and NZAX. The Listing Rules set out mandatory standards for listed issuers. The first stage of the review is extensive, with 79 questions covering the overall market structure, issuers and products (equity, debt, funds). There will be another consultation phase early next year, and it is intended that the KEEPING amended rules will take effect in late 2018 subject MEMBERS CURRENT to a transitional period. NZX’s proposed market structure includes separate Our final GovernanceUpdate of 2017 was emailed boards for equity, debt and funds and differential to members recently to keep you abreast of the standards for each (fit-for-purposes rules). latest governance and director-related developments. This would mean combining the three existing It includes: equity boards into one, with a single set of rules. The one consolidated board would have two tiers an overview of key government policies of issuers, referred to as premium and standard issuers for the purposes of an introduction to the EU’s wide-reaching data the review. Premium issuers would protection regulation be subject to higher standards than standard issuers. an update on health and safety case law The IoD’s submission on 02 the review focuses mainly on tips for boards in ethics and culture the proposed structure and governance and board/director recent thought leadership research and reports. matters in relation to equity issuers. ALL SUBMISSIONS AND GOVERNANCE RESOURCES THIS SUBMISSION IS AVAILABLE AT IOD.ORG.NZ CAN BE VIEWED AT IOD.ORG.NZ
December / January 2018 37 MakingMakingaa differencedifference
Not-for-profits and the Governance with Purpose programme.
38 BOARDROOM FEATURE
01 Catherine Cooney, facilitator, Governance with Purpose programme 02 Blair Matheson, chair, Anamata CAFE
Social service providers from Whangarei to Bluff are enjoying the benefits of improved governance as a result of a unique programme developed by the Ministry of Social Development and the Institute of Directors. 01 02
he Governance with Purpose programme was introduced last Tyear and to date has delivered The motivation of people highly customised training to 106 committees, trusts and boards of non- who govern nFPs is profit organisations that work at the front line of social service provision. always so impressive ... The programme’s aim is to make governance training accessible and Everyone is so appreciative affordable to small service providers, especially those in the regions. More than of the opportunity for 20 facilitators across five regions are trained in delivering the tailored course governance learning. content. Course venues and dates are Catherine Cooney chosen by attendees, who are also able to choose their facilitator from a shortlist. for both the content and course facilitator at polytechnic. She and her husband HEALTHY GOVERNANCE former nurse, midwife and Lakes DHB CEO also used to own a farm and contracting Catherine Cooney. business but are now semi-retired. aupo youth organisation Anamata Bleakley, who was Anamata board She said the board was delighted to see CAFE is one of the groups that chair for 10 years until January, said three Cooney on the facilitator shortlist because Thas undergone the training and board members had joined Anamata quite of her depth of health experience. Cooney as a result is implementing numerous recently when the course invitation came was Lakes DHB CEO from 2001 to 2012. governance changes. through and the rest of the board felt a bit “As we are a youth health clinic and have Formerly known as Cafe for Youth stale so the invitation was very timely. some specialised jargon and services, it was Health, Anamata CAFE (Clinics and “It was a fantastic opportunity to have great that Catherine knew all about us and Advice For Everyone) opened in 1990 and an informative day and also do a bit of could speak our language. provides an accessible health service at bonding. It’s quite difficult in Taupo to get “She gave us fresh ideas on how to run low to no cost to young people and their to training opportunities for a board, so we our board. We also got the opportunity whānau. All aged under 25 in the Taupo jumped at the chance.” to talk about a couple of issues that had District can access its range of services for been troubling me when I was chair. The free, and sexual health checks are free for UPSKILLING course opened up the conversation on all ages. roles and workload of the board as well as Board chair Blair Matheson and deputy s with the other board members, the blurred lines between governance and chair Shona Bleakley were two of the eight Bleakley is a volunteer. She was a management. Having a whole day together Anamata board members who undertook Asecondary school English teacher gave us the time to get to know each the course in May. Both have high praise then taught business communications other’s strengths. Our monthly meetings >>
December / January 2018 39 << 01 02 are by necessity quite task oriented, so honey-based products. it was good to socialise a bit.” “The Governance with Purpose course Bleakley said the course reinvigorated was an amazing opportunity for us, and It’s quite the longer-term board members and I can’t talk highly enough about Catherine, clarified things for those new to the board. who was absolutely fantastic. She difficult in Since doing the course, board members understood the clinical perspective, and were constantly referring to the supplied her advice was very practical. Her caring, Taupo to get course book. laid-back manner and knowledge of the “It is a great asset with lots of good healthcare needs of young people really to training information, and it reinforces what we made the day.” learned. At the end of the IoD day, we had a As a result of Matheson’s experience opportunities list of things we needed to action, and we are with IoD, Anamata had put some funding regularly referring to the list when we meet.” aside in the annual budget for governance for a board, training, but he said it certainly would not GOVERNANCE AND have covered the cost of training all eight so we MANAGEMENT board members. Another added bonus was that, after jumped at atheson agreed a key benefit of the course, the two most inexperienced the course was clarification of the board members were given the opportunity the chance. Mdifference between governance for a day-long extra governance course Shona Bleakley and management. in Auckland. “We worked quite hard 2 or 3 years “The work that we do as an organisation ago on rebranding (from Cafe for Youth doesn’t have wide appeal, so it is hard to get Health to Anamata CAFE) and began a board members. Those who are here are new strategic direction. We are well down passionate about young people but don’t that path, but it is always beneficial to be always have governance training. This extra reminded of the different roles of board help from MSD has made a big difference.” member and senior manager.” Matheson has been an Anamata board STRATEGIC PLAN member for 3 years and is enjoying his relatively new role as chair. He completed ollowing the Governance with an MBA 4 years ago and is a member of the Purpose programme, the board 01 The Anamata CAFE van IoD. A long-time Taupo resident, he is co- sat down and came up with 15 new 02 World Suicide Prevention F Day 2017 03 Mental Health owner of Huka Honey Hive, a company he outcomes it would like to see. Awareness Day 2017, with local helped found 24 years ago that produces “We’ve already made some real changes police in Taupo
40 BOARDROOM FEATURE
such as running our board meetings differently and making alterations to our annual plan and strategy. Some of the changes are small but make a big impact.” Matheson said, despite being on numerous IoD governance courses himself, this course still taught him something new. “There were lots of little gems such as encouraging all board members to be brave enough to ask the hard and sometimes obvious questions. It’s helped me encourage the rule that there is no such thing as a dumb question at a board meeting.” Cooney’s enthusiasm and encouragement during the course spurred the board to enter Anamata CAFE in the Taupo Business Awards, and in early August, they were delighted to be named winner of the Excellence in Community Contribution award. 03 “This was certainly the result of doing the course and giving us more confidence in what we do,” Matheson said. Facilitator Catherine Cooney said it was There were lots of little humbling to front Governance with Purpose courses as most attendees, like Bleakley gems such as encouraging and Matheson, were volunteers. To date, she has facilitated seven courses and said all board members to be every one was a privilege to lead. “The motivation of people who govern brave enough to ask the NFPs is always so impressive. They welcome me in on these courses and share hard and sometimes obvious their celebrations and their challenges. It is such a special experience to connect questions. with such committed people who give Blair Matheson so much of their time for the good of their community.” organisations certainly do not take this across all four. Facilitators guide attendees opportunity for granted.” through thinking about the future of their OPPORTUNITY TO LEARN In her preparation for each course she organisation and putting together a plan facilitates, Cooney undertakes considerable for implementing any required changes ooney said usually when not- research on the organisation, talks with and creating an even workflow. Attendees for-profit boards and trusts had the chair and investigates the environment are left with a tailored resource book Cany discretionary professional within which they operate. developed by the IoD for future reference. development funding they prioritised their “I need to have this familiarisation Cooney said she always felt proud leaving senior leaders or staff. The Governance with the organisation, and it’s particularly this excellent resource with attendees with Purpose programme allowed trust important when you’re working with small because of its relevance and high quality. members to gain training for themselves, not-for-profit and NGO trusts. It is part She said the course was invaluable for and for some, it was their first formal of the uniqueness of this programme.” creating space for thinking time for busy governance training. Course content includes looking at the trustees and board members to think about “Everyone is so appreciative of the national context and government policy all aspects of their governance role and the opportunity for governance learning and and where the particular social service long-term future of their organisations. it is very affirming for them. They see provider fits within that context. It also “It also gives them confidence on that MSD and IoD are interested in their covers the IoD’s Four Pillars (determination where they are at. It gives attendees organisation and in their governance role of purpose, effective governance a greater appreciation of what they’re in the community and that they want to culture, holding to account and effective doing, affirming their role and what they’re support and grow them. Not-for-profit compliance) and how to find balance contributing locally and to NZ Inc.”
December / January 2018 41 Brought to you by
What’s eating SME Brett Herkt is the founder of boardPro, board management software that’s designed for SMEs and NFPs with clients and not-for- around the world. It delivers up to 75% time savings to those managing the board cycle and prompts good governance on both profit boards? sides of the board table.
nyone who has worked or governed at both THE ORGANISATION’S CONTEXT ends of the corporate spectrum understands DRIVES THEIR NEEDS Ahow the needs of small to medium enterprise (SME) and non-profits differ dramatically to those “SME and non-profits have vastly different needs,” in the corporate sector. says Herkt. SMEs and non-profits simply don’t have Someone who’s become an expert in this area the same level of resource available to manage the is Brett Herkt. Starting professional life with Ernst board cycle. A company with 20–50 staff may have no & Young and later working for a major UK bank, corporate secretary or corporate counsel, small finance he says, “I was a small cog in huge process- teams and often no executive assistant to the CEO. driven wheels at the big end of The organisation is often under- town.” In a diametrically opposed capitalised with ambition that change, he became the CFO of exceeds their capacity. a high-tech start-up, where just As a result, board papers and having cash to make payroll was processes are slow because these a job item. During this wild ride, are prepared and managed on he became CEO, and although he a part-time basis by staff already successfully grew it 400% to 50 busy multi-tasking in their day staff, $14 million annual revenues job. For non-profits, this may even and seven-figure profitability, a be voluntary. disagreement between him and “The board process is a job that the board saw him exit. “The I don't really have time for – yet board didn’t understand effective have to do really well,” says Tama management process in the Matene, administrator, My Future context of a start-up and nor 50% of directors say they Rocks Trust. did I,” says Herkt. Everyone prepares agendas, This epiphany led him to received papers too late to papers and minutes with desktop investigate best practice. Herkt prepare well and the use software then distributes via says he has now spent the last 9 email or shared folders. The CEO years working with boards, senior of generic desktop tools sometimes waits on a last-minute management and administrators added to the problem. email from a manager and doesn’t across the spectrum, from get to it until 5pm on the day The Warehouse and 2Degrees before the meeting. The result Mobile to tech start-ups, chambers of commerce and charities is the board gets the information at 6pm, then has to read it and like the YMCA and Family Planning. He has found a significant apply strategic thought by 9.30am the next day. gap between the tools and resources available to corporate Compounding the issue is that a proportion of board members organisations and those for SME and non-profits. are also inexperienced. Non-profit board members are more
42 BOARDROOM ADVERTORIAL
often industry-specific experts than papers too late to prepare well, and the SOLUTIONS FROM BOARDPRO professional directors. The needs are use of generic desktop tools added therefore intensely practical. to the problem. Having spent nearly FOR BOARD MEMBERS FOR CEOS, MANAGERS 10 years talking AND ADMINISTRATORS with hundreds For board members, it’s getting quality information in a usable format in enough In polling, Herkt says, “The results speak of SME board time that a decent contribution can be clearly to the need to get time back members, CEOs and made to strategic matters. whilst delivering quality information to Gordon Buswell, past CEO of ITM, boards. Nearly 80% of managers and administrators, had just retired from corporate administrators assessing board software Herkt says this leadership in 2015 and was getting are doing so to save time. involved with SME governance when “These CEOs often suffer from is clear: he said “What I’m finding in almost unsophisticated systems and record every company is the inability to keeping that means collecting quality CEOs need to own the development maintain strategic perspective and data is difficult, and by the time the of management process, despite the drift away to operational matters.” operational report is complete, there tough job of leading a SME or NFP. Bruce Sheppard, founder Shareholder is little bandwidth left for addressing Association, sits on multiple boards and strategic matters. As we got to grips Likewise, chairs and boards will add says, “I get an email with 12 attachments with on-the-ground challenges of SMEs value by reviewing and improving their and have to click them one by one and and NFPs, it was no surprise to see that governance practices. Check out Sport decide what to print. If I get interrupted considerations like risk management NZ, who are doing a great job helping half-way through, it’s a nightmare to and compliance take a back seat to more their sector. remember where I’m up to.” fundamental matters such as staffing, 50% of directors say they received profitability, growth and funding.”
DirectorVacancies DirectorVacancies is a cost-effective way to reach IoD members – New Zealand’s largest pool of director talent. We will list your vacancy until the application deadline closes or until you find a suitable candidate. Contact us on 0800 846 369.
MANUKA STREET GLAUCOMA NEW ZEALAND NZ RECREATION ASSOCIATION LIANZA CHARITABLE TRUST Role: Voluntary board Role: Board members Role: Treasurer Role: Trustee members (x2) Location: Wellington or virtual Location: Wellington Location: Nelson Location: Auckland Closes: 18 Dec 2017 ASPIRE CANTERBURY CANTERBURY BASKETBALL THE HOME OF ST BARNABAS Role: Chairperson and ASSOCIATION INC. The following positions will TRUST treasurer Role: Board members, remain open until filled: Role: Board members (x2–3) Location: Christchurch including independent chair Location: St Clair, Dunedin Location: Christchurch MOSGIEL MEMORIAL RSA INC. GIRLGUIDING NZ Role: Board members (x2–3) HOHEPA HOMES TRUST BOARD Role: Chair of audit and CREATIVE WAIKATO Location: Mosgiel Role: Trustees/directors (2) finance/national board Role: Trustees Location: National member Location: Hamilton VILLAGE COMMUNITY TRUST Location: National T/A WORKSTAR CONNECT SOUTH ADVENTURE Role: Chairperson, treasurer, Role: Board members (x2) TUI ORA LTD DEVELOPMENT LTD general members Location: Dunedin Role: Director (x2) Role: Independent Location: Nelson Location: New Plymouth non-executive director Location: Dunedin
December / January 2018 43 Out & about
International The National Association of Corporate Directors (NACD) Global Board Leaders’ Summit 2017 was held in Washington at the end of September. IoD President Liz Coutts (pictured 02 with NACD Chair Dr Karen Horn) attended along with IoD CEO Kirsten Patterson. 01
02
03 National Held in Auckland at the end of October, Eye on Asia was a collaboration between the IoD, New Zealand Asian Leaders and the Superdiversity Centre. It was facilitated by Chartered 04 Fellow David Jackson (third from left) and Chartered Member Mai Chen (fifth from left). Nelson Marlborough Simon Lamb and Taylor Keen (above) enjoyed an evening function at Wither Hills winery in Blenheim, at which Christchurch-based director Abby Foote spoke about the changing face of audit and risk and the vital role these governance functions play in creating business value.
05 06 Auckland Colin MacDonald (right), CE of the Department Internal Affairs, spoke to members in October about digital disruption in the public sector, highlighting key questions for directors to ask in the digital space. 07
44 BOARDROOM OUT & ABOUT
Canterbury Congratulations to Quentin Hix (right), who recently became a Chartered Fellow of the Institute of Directors. Canterbury’s Chartered Fellows and Distinguished Fellows joined the IoD president, vice president, CEO, branch committee members and guests for dinner following an October function with winemaker Allan Scott.
08
10 11 Otago Southland In October, members enjoyed an evening with Paul Brainerd (above), who posed the question: “Is it possible to create a socially responsible business in a community of 362 people and 30,000 sheep?” Later in October, Lani Evans and Casey Davies-Bell looked at business beyond the bottom line as part of our What Matters in Sustainability campaign. 09
Company Directors’ Course 29 October 2017, Queenstown
BACK ROW: Nicola Taylor, Hayley Alexander, David Hutchinson, Duncan McGhie, Wendy Larner, Brett King, Erica Lloyd, Rowan Dixon, Lachie McKenzie, Patrick Reynolds, Alan Hard, Callum Wood FRONT ROW: Michael Reaburn, Ross McMillan, Anthony King, Clare O’Neill, Mark Robinson, Marion Heeney, Rob Craig, Ainsley Luscombe, Annie Brown, Sid Miller, Simon Lange, Ana Molloy
01 NACD Global Board Leaders’ Summit Leon Fung, Dr Xiaoying Fu 09 Andrew Kilsby, Heidi Renata, 02 NACD Chair Dr Karen Horn, IoD President 04 Simon Lamb, Taylor Keen Gerald Davies Liz Coutts 05 Don Aue 10 Paul Brainerd, Murray Donald 03 Left to right: Jay Changlani, 06 Godfrey Boyce, Nick Moyes 11 Jay Cameron, Johnny Stevenson, Chandan Ohri, David Jackson, 07 DIA Chief Executive Colin MacDonald Kerry Lynn Sameer Handa, Mai Chen, Ziena Jalil, 08 Vincent Pooch, Quentin Hix
December / January 2018 45 AUCKLAND NELSON FEBRUARY MARLBOROUGH Events MARCH diary 13 Governance 06 For more information, visit iod.org.nz, or contact the Essentials Governance director development team or your local branch manager. Essentials 14 Finance Essentials 07 Reporting to the Board 14 Company Reporting to the Board WELLINGTON FEBRUARY Directors’ Course 15 Digital Essentials 20 A fundamental 5-day course for directors and senior executives Governance who have governance experience. Essentials
21 21 MAY Finance Essentials Auckland Company Directors’ Course 22 – Non-residential MARCH Strategy Essentials
30 MAY 05 MARCH 18 FEBRUARY Queenstown Governance Essentials Auckland Company Directors’ Course 01 Refresher 06 Reporting to the Board 04 MARCH Strategy Essentials Waiheke Island 10 JUNE 20 Auckland 07 Advanced Health 11 MARCH Finance Essentials and Safety Governance Queenstown 17 JUNE Queenstown 17 21 18 MARCH Masterclass: Governance Essentials Auckland 09 JULY Governance in a Digitally Wellington Disruptive World 22 15 APRIL Company Directors’ Course Finance Essentials Queenstown Refresher – Non-residential 20 Company Directors’ CHRISTCHURCH 06 MAY 19 AUGUST Course Refresher MARCH Wellington Auckland 22 1 13 MAY 26 AUGUST Audit and Risk Board Dynamics Intensive Queenstown Wellington Committees
27 FEBRUARY 27 MARCH Chairing Fundamentals Risk Trends Are you new to the chair role or thinking This interactive webinar focuses about taking that next step? Join our on how directors can gain a better experienced chair facilitator who will understanding of risks in their provide you with fundamental knowledge organisations. Webinars 2018 of the chair role.
46 BOARDROOM EVENTS DIARY
Online BRANCH EVENTS learning FOR INFORMATION ON MEMBER EVENTS IN YOUR Any time. Anywhere. AREA, SEE IOD.ORG.NZ
Health and Safety BRANCH MANAGER CONTACT DETAILS Governance 5 CPD points AUCKLAND NELSON MARLBOROUGH WAIKATO Shirley Hastings Karen Goodger Megan Beveridge Not-for-profit Finance P: 021 324 340 P: 027 525 7400 P: 021 358 772 Fundamentals F: 04 499 9488 [email protected] [email protected] 5 CPD points [email protected] OTAGO SOUTHLAND WELLINGTON Directors’ and Officers’ BAY OF PLENTY Vivienne Seaton Pauline Prince Insurance Laura Gaveika P: 021 152 2809 P: 021 545 013 3 CPD points P: 027 588 8118 F: 04 499 9488 F: 04 499 9488 [email protected] [email protected] or 04 474 7534 Ethics – How [email protected] Directors do Business CANTERBURY TARANAKI 5 CPD points Sharynn Johnson Julie Langford P: 03 355 6650 P: 021 806 237 F: 03 355 6850 [email protected] [email protected]
Commit to life-long learning
Book your courses for 2018 To request the latest catalogue of 2018 IoD professional development courses please call us on 0800 846 369 or email [email protected] For 2018 course dates and prices go to www.iod.org.nz/director-development
December / January 2018 47 Every organisation with
needs strong governance and leadership.
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